Technicians are fond of saying that the most bullish thing a market can do is to make a new high. This simple study takes a more nuanced view, finding that the sustainability of a new high is related to its underlying technical, monetary, and economic underpinnings. On that score, this market—as overvalued as it may be—is currently “thrice-blessed,” and we expect even higher highs in the fourth quarter.
The odds of recession in the next 12 months appear low based on a number of financial indicators, including the yield curve, corporate credit spreads, and of course the stock market. We generally prefer these market-based measures over government generated statistics for economic forecasting purposes. The Boom/Bust Indicator, however, combines a market-based measure (commodity prices) with a weekly government report on the employment situation.
One of this year’s many perplexing leadership trends has been the weak relative action of the once-coveted S&P 500 Dividend Aristocrats in the face of a solid bond market rally. We certainly aren’t complaining, since we’ve been highlighting the valuation risks embedded in these bond-like stocks for what seems like forever.
While we wouldn’t go so far as to tar it with the “bubble” epithet, the ongoing investor obsession with stability strikes us as considerably more dangerous than the situation in the Technology sector. While many see market parallels with 1999, we instead see a mirror image.
Children eventually reach an age when they outgrow the need or desire for an elaborately staged birthday party. In the case of a certain bull born back in March 2009, that age appears to be eight.
Don’t tell The Donald, but the stock market doesn’t take him seriously. The market took JFK seriously. In April 1962, Kennedy clashed with steel companies. The S&P 500 plummeted 24% over the next two months as the confrontation continued.
The advance since March 2009 has just surpassed the bull market of 1990-1998 to become the second longest bull of all time, and it will move into the top spot if it can survive until next March 15th (the “Ides of March”). Intrigued by this market’s similarities with the 1990s, we updated a study that reinforces a point we’ve made for a while: Among the six major measures examined here, the stock market looks least overvalued on the basis of the S&P 500 5-Yr. Normalized P/E.
We’ve annoyed a few media outlets by admitting to having no clue as to which of the presidential candidates would be “better” for the stock market.
Our Emerging Markets Allocation Model triggered a BUY signal at the end of August after 5 1/2 years in bear mode. Leadership trends within Emerging Markets confirm that 2016 could represent a major inflection point.